An in-kind donation refers to charitable giving through goods and services. Learn about an alternative to monetary gifts with this in-kind donation guide for your nonprofit. You don’t want to miss this essential information!
What Are In-Kind Donations?
In-kind donations support nonprofit organizations. The two types of in-kind donations are goods and services. Goods include tangible items like food, clothing, technology, and furniture. Services include pro bono work from professionals like accounting services, graphic design, and legal work.
Typically, donations come from community members, local businesses, nonprofit board members, and large companies. When donors provide goods or services, they directly assist the nonprofit organization.
Benefits On In-Kind Donations
In-kind donations help nonprofits obtain goods and services that are otherwise too expensive, especially when the organization is on a tight budget. Gifts allow nonprofits to use resources on other parts of the operation.
Some organizations, like food pantries and homeless shelters, need in-kind donations to support their operations. For example, a pack of wholesale socks can help people in need keep their feet warm and dry. Other nonprofits may use donations for fundraising campaigns like galas or auctions. That said, most nonprofits can benefit from accepting in-kind donations.
Challenges To Know
The main challenge with in-kind donations is that people give out the kindness of their hearts, but the items they give aren’t always useful for your organization. You risk throwing away a donation or declining gifts and looking “ungrateful” to donors. However, accepting unnecessary items can take up storage space or become a hassle to maintain. Fortunately, planning can help you avoid donation challenges.
Create a Gift Acceptance Policy
Gift acceptance policies allow your nonprofit to establish which contributions are helpful for your mission and explain expectations to your donors. That way, you can rightfully refuse a gift that won’t advance your mission while displaying gratitude for the offers.
The details of your acceptance policy depend on the size of your organization. Include the following points in your policy:
- Types of gifts you accept
- Types of gifts you don’t accept
- Condition of gifts you accept (i.e., new or gently used)
Track In-Kind Donations as Revenue
Nonprofits must track in-kind donations to comply with state laws. By including non-cash gifts in financial statements, the government can manage the community’s involvement in organizations.
Use fair market value to determine the value of in-kind donations. Fair market value is the normal price people pay for goods and services. It’s easy to calculate tangible items, but services are tricky. Research the average price of services to estimate the donation’s value.
In-kind donations are incredibly helpful for nonprofit organizations, including yours! Supporters can directly impact your nonprofit year-round with their donations. If you need to brush up on your knowledge, always refer to this in-kind donation guide for your nonprofit.